Development strategies public exp - india

Nayana RenuKumarCENTRE FOR GOOD GOVERNANCE

Public Expenditure Trends and Patterns - India

Indian Economy

Impressive growth in last two decades

Recent slow down in response to global cues and internal strains (rising inflation, declining investment, structural bottlenecks)

Latest reforms measures cover FDI, subsidies, tax reforms, innovation and open government

Opportunities: Demographic dividend, innovative and entrepreneurial business class

Key challenges: Making growth more inclusive, addressing widespread poverty and rising inequality

Large share of population employed in informal sector affecting tax collection

and in turn, public sending

Limited access to basic services

State of public finances

Substantial improvement till 2007-08

Fiscal deficit down to 4%

Expansion of Corporate sector and corporate tax receipts

New tax on services and high proceeds from personal income

tax

Weakening of finances since 2010

High fiscal deficit from tax cuts, debt write offs, public sector

wage raise and high subsidies in energy sector

Regulatory environment characterised by state control, barriers

to entrepreneurship and obstacles to trade and investment

Public spending for Development : Reducing Poverty and Inequality

Impressive progress in reducing absolute poverty offset by rising inequality since 1990s especially between rural and urban areas

India ranks 134 in HDI 2010-11 but has performed better than most (including high and very high human development) countries in terms of average annual HDI growth rate

Existing gap in health and education indicators indicates the need for much faster and wider spread of basic health and education

Item2011-12 BE

Areas Exp.

Expenditure on social services as a proportion of GDP

6.74%

Education 3.11

Health 1.3

Others 2.34

Expenditure on social services as a proportion of total government expenditure

25%

Education 11.5

Health 4.8

Others 8.7

Public expenditure trends and patterns

Health

India’s public spending at 1.4 % of GDP is among the lowest in the world

India spends $43 per head, counterparts in Sri Lanka invest $87, China spends $155 and Thailand over six times at $261

Out-of-pocket costs accounts for 67% of total expenditure on health in India

Education Public spending on education is about 3.1% of GDP

Infrastructure

Total investment in infrastructure (roads, railways, ports, airports, electricity, telecommunications, oil gas pipelines and irrigation) have increased from 5.7% of GDP in base year of the 11th Plan to around 8.0% in the last year of the Plan

India’s expenditure on flagships programs for inclusivenessProgramme Ministry/ Department

Total 11th Plan (Rs. In crores)

Mahatma Gandhi National Rural Employment Guarantee Act

Rural Development 1,56,301

Indira Awas Yojana Rural Development 41,486

National Social Assistance Programme Rural Development 23,536

Pradhan Mantri Gram Sadak Yojana Rural Development 65,002

National Rural Health Mission Health & Family Welfare 69,214

Integrated Child Development Scheme Women & Child Development 38,980

Mid Day Meal School Education & Literacy 38,602

Sarva Siksha Abhiyan School Education & Literacy 77,576

Jawahar Lal Nehru National Urban Renewal Mission

Urban Development 48,485

Accelerated Irrigation Benefit Programme and Other water resources programme

Water Resources 46,622

Rajiv Gandhi Gramin Vidyuti Karan Yojana Power 25,913

Rajiv Gandhi Rural Drinking Water Mission and Total Sanitation Campaign

Drinking Water Supply 46,722

Rashtriya Krishi Vikas Yojana Agriculture & Cooperation 18,550

Grand Total (Rupees seventy thousand crores approx.) 6,91,976

Eleventh Plan gave special impetus to several programmes aimed at building rural and urban infrastructure and providing basic services for increasing inclusiveness and reducing poverty

Measures to increase efficiency of public expenditure

India’s emerging economy with large unmet minimum needs of the masses require focus on equity issues and macroeconomic needs. Prudential limits on deficits and debts and optimization public expenditure outcomes essential

High-level committee constituted to go into the expenditure classification and management in a comprehensive way. Main recommendations : Fundamental shift in public expenditure management - budgeting

linked to outputs and outcomes Portal to place information on flow of resources and their utilization on

public domain All States to include information about investment outlays of State

Public Sector Enterprises and resources of rural and urban local bodies as part of State Plans

Provide regular updates on Project-wise, Ministry-wise and Sector-wise information on Public Private Partnerships in Central and State Budgets

Measures to increase efficiency of public expenditure

Government’s has evolved a comprehensive strategy in 12th FYP for further lowering poverty and reversing the pattern of growing inequality. Key elements:

Policies to improve health, nutrition and educational outcomes

Labour market reforms to reduce segmentation between formal and informal employment

Tax reforms to increase redistributive effects of tax

Making social spending a more powerful tool to deal with rising inequality. Social spending, which amounts to about 5% of GDP in India, is low including in comparison to other large emerging economies

Key reform measures

Opening up key sectors to FDI

Reduction in energy subsidies Adoption of open government policies to increase

transparency and reduce corruption

National data sharing and accessibility policy

Right to Public Services Measures to promote innovation

National Innovation Council and National Innovation

Strategy

Decade of Innovation 2010-2020

Indian Inclusive Innovation Fund

Thank you